Friday, February 17, 2017

Create a Copyright Office for the Digital Economy

On February 6, Rep. Tom Marino introduced H.R.890, the “Copyright Office for the Digital Economy Act.” The bill would modernize the U.S. Copyright Office by reorganizing its structure and authorizing it to improve its primary functions in securing copyright protections for creative artists and their assigns. H.R.890 offers a sensible approach for finally bringing the Copyright Office into the Digital Age.
Securing copyrights and other intellectual property (IP) rights is mission-critical to promoting economic growth and jobs in the U.S. economy. “IP-intensive industries directly and indirectly supported 45.5 million jobs, about 30 percent of all employment” in 2014, according to Intellectual Property and the U.S. Economy: A 2016 Update,” a comprehensive report released by the U.S. Department of Commerce. “IP-intensive industries accounted for $6.6 trillion in value added in 2014,” and thus contributed 38.2% of U.S. gross domestic product (GDP). Moreover, a December 2016 report published by the International Intellectual Property Alliance (IIPA) titledCopyright Industries in the U.S. Economy,” found that the “core copyright industries” generated $1.2 trillion in U.S. economic activity in 2015. That same year, copyright industries employed 5.5 million U.S. workers, or 3.87% of the nation’s workforce.
H.R. 890 would replace the Register of Copyrights with a Director nominated by the President and confirmed by the Senate, subject to removal for cause by the President. Authority over administrative functions regarding copyright matters would be transferred from the Librarian of Congress to the new Director of the Copyright Office. Those provisions would significantly increase the Copyright Office’s autonomy from the Library of Congress while maintaining the Office’s status as a legislative agency. Further, the Director would be authorized to modernize the copyright registration system by facilitating more efficient registration and meaningful access to records. And the Director would be charged with establishing a Copyright Advisory Board to advise and consult with the Office on “emerging practices regarding copyright, including technology practices.”
In many respects, H.R. 890’s provisions parallel the proposal by Chairman Bob Goodlatte and Ranking Member John Conyers for modernizing the Copyright Office. Free State Foundation President Randolph J. May and I submitted to the House Judiciary Committee a letter analyzing the strong merits of the Goodlatte/Conyers proposal. Our letter also emphasized the pressing need for Copyright Office reform as well as the economic benefits that would likely result from updating its administrative functions, including a new searchable database of copyright registrations and recorded transfers of ownership.

It is encouraging to have a bill introduced in Congress that addresses copyright modernization concerns in concrete form. With bipartisan co-sponsorship, H.R. 890 was also referred to the House Judiciary Committee. The “Copyright Office for the Digital Economy Act” is a welcome addition to the ongoing copyright modernization effort and merits prompt consideration by the Judiciary Committee. Indeed, a modernized Copyright Office with sufficient autonomy and authority to perform its important functions effectively is necessary to ensure that the contribution of the copyright industries to the health and wealth of our nation’s economy continues to grow.

Wednesday, February 15, 2017

Increase Economic Prosperity by Strengthening IP Rights Protections

By Seth L. Cooper and Michael J. Horney

On February 8, 2016, the U.S. Chamber of Commerce’s Global Intellectual Property Center (GIPC) released the fifth edition of the International IP Index. Entitled “The Roots of Innovation,” the Index scored the IP systems of 45 countries, representing over 90 percent of the world’s gross domestic product (GDP). Scores were derived from several specific factors pertinent to IP rights protections, allowing policymakers to better understand where their countries stand in comparison to their peers.

The International IP Index should prompt U.S. policymakers to strengthen our IP rights system. Although the U.S. ranked high in the Index, the Index nonetheless identified IP rights enforcement as one of the areas in which improvements need to be made. Lackluster Index scores for IP rights systems in certain foreign countries should also spur U.S. trade negotiators to seek stronger protections for Americans’ IP rights overseas. By bolstering IP protections, the U.S. will further benefit from the correlations between strong IP rights and overall economic innovation and investment. 

Scores in the Index were based on six key categories, including: patent rights, copyrights, trademarks, trade secrets and market access, and enforcement, as well as membership and ratification of international treaties. Those categories encompassed numerous indicators of a strong IP system, including: industrial designs term of protection, availability of legal measures to obtain redress for unauthorized use of industrial design rights, regulatory and administrative barriers to the commercialization of IP assets, and transparency and public reporting by customs authorities of trade-related IP infringement.

Because scoring for this year’s Index was based on 35 indicators, instead of 30, a weighted-score was calculated (by Michael Horney) to determine whether countries’ protections of IP rights were stronger or weaker than what was calculated in last year’s Index. Of the 38 countries included in the last Index, twenty improved their weighted-scores in this year’s Index.

For the fifth consecutive year, the United States had the highest score. The U.S. IP system rated 32.62 (out of 35). The United Kingdom and Germany followed with scores of 32.39 and 31.92, respectively. The countries with the lowest scores were India, Pakistan, and Venezuela at 8.75, 8.37, and 6.88, respectively.

However, the United States’ weighted-score, which takes into account five new indicators, actually decreased compared to the prior Index. The U.S. fell to 10th place in patent protections after previously being tied for first. A reason for this drop is that the patent opposition system in the U.S. adds substantial costs and uncertainty to the economy. The U.S. also needs to improve its enforcement efforts to combat counterfeit and pirated goods. Certainly, Congress can help step up enforcement by reforming and updating the Digital Millennium Copyright Act’s “notice and takedown system” under Section 512. Modernizing the U.S. Copyright Office and giving it authority for addressing Section 512 matters as well as small claims for infringement – as provided in the Goodlatte/Conyers proposal – would also bolster IP protections.

Moreover, the relative lack of IP rights protections in several other countries, as reflected in the Index, reinforces the need for U.S. pursuit of treaties or agreements to better secure protections for American IP rights holders internationally. In January, President Trump withdrew the U.S. from the Trans-Pacific Partnership (TPP) agreement, which the Index regarded as pro-IP. But there is no reason to think that TPP provisions regarding IP rights prompted the withdrawal. Rather, the U.S. should seek new bi-lateral or multi-lateral agreements, including ones more narrowly focused on strengthening protections for American IP rights holders in foreign countries. And as more countries adopt strong protections for IP rights through trade agreements, the global economy will grow substantially. Mutual gains from international trade are much higher when more nations adopt and enforce laws that protect IP rights.

Indeed, the Index emphasized how “IP provides the living and growing roots that stimulate innovation and bolster growth,” since economies with “the strongest IP systems stand to reap the greatest economic rewards.” Across all countries, the Index found several noteworthy correlations between strong IP protections and economic innovation and creativity:
  • Resources dedicated to innovation: Economies that provide a robust IP environment are more likely to embrace policies that create a complete innovation “ecosystem” by investing in other key building blocks, such as human capital and technological infrastructure.
  • R&D and creative activities: Economies that exhibit a steady buzz of innovation and creativity are, with few exceptions, those that have established strong IP environments – both generally and for specific high-tech sectors. The opposite is also true: on the whole, those economies with relatively weaker IP environments do not tend to experience the levels of R&D and release of new content that economies with more secure and stable IP environments do.
  • Access to technologies and creative content: A strong relationship exists between IP protections and greater access to end products and services that make novel technologies and content available to consumers.
  • A dynamic economy: IP is strongly related to measures of foreign direct investment, business and industrial growth, jobs, and GDP, ultimately providing the basis for reinvestment of resources as the virtuous cycle begins anew.

The Index concluded that strong protections of IP rights incentivize investment in R&D, innovation, and creative content because they ensure entrepreneurs have opportunity to earn a return on their labors. And as economies with strong IP rights regimes grow and prosper, new goods and services are brought to market, making consumers the ultimate beneficiaries.

The International IP Index provides U.S. policymakers a useful tool for assessing how to improve our nation’s IP systems and enhance innovation and creativity in the 21st Century economy. 

Friday, February 03, 2017

Thinking Things Through XI: On Weed Whackers, Partisanship, and Regulatory Philosophy

I expect the Federal Communications Commission under new Chairman Ajit Pai to do well by getting the agency to do less. But before the agency can do less, in one sense it has to do more. That is, more in the way of curtailing existing regulations that either shouldn’t have been adopted in the first place or that are no longer necessary or cost-justified.
At his address at the Free State Foundation’s Tenth Annual Gala Conference on December 7, 2016, Chairman Pai made his deregulatory intent clear, stating that, “[i][n the months to come, we also need to remove outdated and unnecessary regulations.” Perhaps with only a bit of hyperbole, he declared: “We need to fire up the weed whacker and remove those rules that are holding back investment, innovation, and job creation.” I’m pleased that he added immediately thereafter: “Free State and others have already identified many that should go.”
Chairman Pai is off to a good start. He’s pulled from current consideration two significant draft orders prepared under former Chairman Tom Wheeler’s direction. One would have imposed ill-conceived, costly regulatory mandates on TV set-top boxes at a time when the video marketplace is undergoing rapid change in the direction of increased consumer choice and competition. And, in the process, the proposed regulation would have undermined the ability of content creators to protect their copyrights and their contractual interests in video programs.
The other draft order would have re-regulated the rates – in effect, forced them lower – for business broadband services offered by the former “telephone” companies. This would have come at a time when new entrants like former “cable” companies increasingly are gaining a competitive foothold. In other words, the Wheeler proposal would have made it more difficult for new facilities-based (emphasis on facilities-based!) entrants like cable operators to compete, hindering the development of a more competitive market.
Chairman Pai also withdrew a draft “Section 706” report prepared under Mr. Wheeler’s direction. Under Chairman Wheeler, these broadband deployment status reports regularly had been used as a means to the end of justifying more broadband regulation. No matter how speedy the pace of deployment, or the increase in available bandwidth, the Wheeler Commission refused to determine that deployment is occurring, in the words of the statute, “in a reasonable and timely fashion.” The goalposts kept moving – so that the Commission somehow could avoid finding broadband deployment reasonable. I suspect that under Chairman Pai the Section 706 reports will be grounded in marketplace realities rather than in preconceived notions.
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Now, all that said, I want to suggest this important point regarding regulation and regulatory agendas at the FCC. It would be a mistake, and na├»ve, to assume, as some are suggesting, that there won’t any longer be partisan splits on votes on major items under a Pai Commission. I expect there will be – and there is nothing inherently wrong with this to the extent that commissioners’ votes are grounded in differing philosophical principles or perspectives. After all, there are real differences in philosophical perspective between the parties with which the commissioners identify regarding the proper role of government regulation.
It is blinking reality to suggest communications policy is somehow immune, or should be, from application of different regulatory perspectives that, at least at times, are rooted in different partisan affiliations. Especially with regard to formulating communications policies, consistent with congressional delegations of authority, that are dependent on criteria such as the extent of existing and potential competition, the rate of technological change, the forecast evolution of consumer demands, and so forth, there are no ironclad Newtonian laws that govern, no E=MC2. Many times the “right” answer in evaluating competition or competitive impact, for example, won’t be found in some mathematical equation, not even a Herfindahl-Hirschman Index.
The FCC is established as a bipartisan agency, not a nonpartisan one. Unlike the Federal Election Commission, for example, which by law must be composed of an equal number of Democrats and Republicans, the five-member FCC may have no more than three members from the same party. And the President designates the FCC chairman, so, as former President Obama famously reminded us early in his first term, elections have consequences. There is no reason not to acknowledge forthrightly that Ajit Pai and Michael O’Rielly adhere to a more deregulatory perspective than the more pro-regulatory one of, say, Tom Wheeler, Mignon Clyburn, and Jessica Rosenworcel.     
Now, I do not mean to suggest for a moment that efforts should not be made at the FCC to minimize partisan differences, especially on contentious items. I expect that Chairman Pai will make such efforts to seek compromises where possible. Just engaging in such efforts often can lead to sounder decisions. After all, a multimember commission like the FCC is grounded, at least in part, in the idea that good-faith collaborative discussions among commissioners with a genuine receptivity to considering opposing viewpoints will produce better decisions, even if not unanimity.
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Finally, in acknowledging the legitimate role that differing philosophical perspectives necessarily play in the realm of formulating communications law and policy, I don’t mean to suggest – and don’t want to be misunderstood as suggesting – that in reaching particular decisions, whether in the context of adjudications or rulemakings, careful consideration of actual record evidence is not of utmost importance. Of course, it is. And any FCC commissioner who fails to accord a proceeding’s evidence proper consideration is derelict.
But it serves no useful purpose to deny that when decision-time comes, the conclusions to be drawn from the evidentiary record may differ. Again, particularly when it comes to matters based on judgments regarding the extent of existing market competition and future prospects, or predictions concerning the rapidity of technological advances, or of prospective consumer benefits or harms, there are no mathematical formulas to apply.
It is in this context, and especially, say, when the evidence is roughly in equipoise, or seems to be – or as the economists say, “well, on the one hand this, but on the other that” – that it is perfectly proper for a commissioner with a deregulatory orientation, as a matter of philosophical principle, to resort to a default presumption in favor of not imposing a regulatory mandate. In other words, as I have recently proposed, in the absence of clear and convincing evidence to the contrary, and within the confines of the Communications Act, in today’s Digital Age marketplace environment in which competition and consumer choice have become increasingly ubiquitous, employing a deregulatory presumption is entirely proper.
In sum, Chairman Pai’s regulatory “weed whacker” surely has its uses. Otherwise, as he put it in his Free State Foundation address, unnecessary regulations will hold back “investment, innovation, and job creation.”

Thursday, February 02, 2017

FCC Chairman Pai to Release Items Publicly Before Commission Votes

Today, FCC Chairman Ajit Pai announced a new pilot program with the effort of making the FCC more open and transparent. Chairman Pai said that when a proposed rulemaking is released publicly after the vote takes place it is “precisely the opposite of transparency.” Chairman Pai states that under the new pilot program he will publish proposed rulemakings on the same day that he presents them to his fellow Commissioners. If successful, Chairman Pai said this reform will become common practice at the FCC.
In a January 2017 blog entitled “A Proposal for Trialing FCC Process Reforms,” FSF President Randolph May proposed a number of process reforms for the FCC. Specifically, Mr. May proposed that the FCC publish its items online before the Commission votes, adding that “it seems to make little sense to deny the public access to the full text of the item.” Mr. May also stated: “Posting the text on the Commission’s website will eliminate disparities in access by the public to Commission information and also reduce misunderstandings that arise from selective filtering and partial release of snippets of the draft item.”

I commend Chairman Pai for his leadership in establishing such an important process reform. FSF scholars have been critical of the Commission for lacking transparency during its rulemaking process. By allowing the public to access proposals before the Commission votes on them, the FCC will establish greater transparency and public confidence.

Wednesday, February 01, 2017

An Infusion of Support for 5G Spectrum Allocation

By Gregory J. Vogt Visiting Fellow, Free State Foundation

A fresh infusion of political capital is quickly taking shape to support broadband infrastructure development, including wireless spectrum needs. The next generation of wireless broadband, often-termed 5G, promises enormous consumer welfare and societal benefits, as Free State Foundation’s Michael Horney detailed here. Congress, new Federal Communications Commission Chairman Ajit Pai, and Secretary of Commerce nominee Wilbur Ross all have expressed commitments to locate and reallocate more spectrum for 5G wireless networks.

These efforts appear to be in tune with President Trump’s stated interest in substantially enhancing American infrastructure investment. Providing the government with market-oriented incentives to relinquish inefficiently used spectrum would jumpstart the ongoing reallocation efforts. And at the same time the FCC should continue its recent efforts to allocate more spectrum to accommodate new 5G wireless networks. 

Commerce, Science & Transportation Committee Senators John Thune (Chairman, R-SD) and Bill Nelson (Ranking Member, D-FL), quickly reintroduced a slightly revised bipartisan MOBILE NOW Act, which passed the Committee on January 24, 2017. Although MOBILE NOW could still be further strengthened, as I point out here, this legislative effort is very important to advancing prospects for build-out of 5G wireless passage without undue delay.

Newly appointed FCC Chairman Ajit Pai has touted the need to promote broadband throughout America, particularly in unserved and rural areas of the country. Encouraging provision of broadband to digital have-nots and the establishment of "Gigabit Opportunity Zones" are key aspects of the developing policy. Chairman Pai recognizes that there are a number of technological, financial, and regulatory facets to achieving his policy goal of advancing 5G deployment. For example, the FCC will need to work with state and local governments to remove or minimize existing impediments to infrastructure build-out such as unduly restrictive rights-of-way policies or the imposition of unreasonably high permitting fees.

Secretary of Commerce nominee Ross at his January 18 confirmation hearing before the Senate Commerce Committee stated that the government needs to do more to ensure that government uses spectrum more efficiently and that sufficient spectrum be allocated for commercial wireless systems. He displayed a knowledge of government spectrum use, the need for more commercial mobile wireless spectrum, and the difficulties of prying underutilized spectrum from government users. He opined that the government needs to be provided with incentives to give up spectrum where it is not needed or is used inefficiently. He recognized how important broadband deployment is to overall infrastructure development.

Most certainly, all these efforts are moving forward from a base provided by the Obama Administration’s plan to reallocate 500 MHz of spectrum for private mobile wireless broadband use. And the Wheeler FCC commendably took strides to reallocate and repurpose spectrum in efforts to move towards achievement of the goal. But as Free State Foundation President Randolph May and I said here, these efforts lagged in the waning days of the Obama Administration.

A rededicated effort to find more spectrum for wireless use, particularly to support 5G services and equipment, would be welcome news for enhancing American infrastructure development and consumer welfare. For example, a January 2017 study by Deloitte demonstrates the very real benefits to be achieved by the spectrum reallocation effort:

·         Energy. Wireless-enabled smart grids will create $1.8 trillion to the U.S. economy –saving consumers hundreds of dollars per year.

·         Health. Wireless devices will create $305 billion in annual health system savings from decreased costs and mortality due to chronic illnesses.

·         Public Safety. Improvements made by wireless connectivity can save lives and reduce crime. A one-minute improvement in emergency response time translates to a reduction of 8% in mortality.

·         Transportation. Wireless powered self-driving cars will reduce emissions by 40-90%, travel times by nearly 40% and delays by 20%. This translates to $447 billion per year in savings, and, more important, 21,700 lives saved.

I have detailed here numerous other sources that address the very real consumer welfare benefits that wireless broadband, including developing 5G capabilities and technology, can reap for American and worldwide consumers.

Providing market-oriented incentives for government to voluntarily relinquish unneeded or inefficiently used spectrum is critical to the spectrum reallocation effort as I detail here. FCC Commissioner O’Rielly has written about the need for government systematically to account for and value the spectrum it uses. Former Commissioner Jessica Rosenworcel also spoke in favor of increasing government incentives, akin to the incentive auction currently being conducted to repurpose over-the-air broadcasting spectrum for private mobile use, to relinquish spectrum. MOBILE NOW, as presently configured, is important, but it can be further improved during the legislative process with regard to mechanisms to incent government reallocation efforts.

5G wireless deployment – that is, 5G infrastructure development – is critical to the future growth prospects of the American economy. Encouragingly, it appears that real political capital may be applied to reinvigorate the 5G spectrum effort. The consumer demand and benefits are palpable. The Administration, Congress, and the FCC appear willing. They should move ahead with dispatch.

Tuesday, January 31, 2017

Broadband Industry Groups Ask FCC to Reconsider Unnecessary Privacy Rules

Last week, multiple industry groups representing Internet service providers filed a petition asking the FCC to stay the unnecessary privacy regulations. The petition also discussed how ISPs are taking steps to protect customers’ privacy online. The groups, which include CTIA, NCTA, USTelecom, as well as various advertising and advocacy groups, state that the FTC's framework has protected Internet users for years while the FCC’s new rules create an inconsistent and confusing framework that weakens data protection online. 

Thursday, January 26, 2017

5G Deployment Projected to Create 3 Million Jobs and $500 Billion in GDP

Earlier this month, Accenture Strategy published a report entitled “Smart Cities: How 5G Can Help Municipalities Become Vibrant Smart Cities.” The next generation of wireless network infrastructure will employ 5G technology, which will feature the dense placement of small cells to deliver speeds 10 times faster than 4G. When 5G technology is deployed, cities will be able to enjoy smarter and more efficient use of local government services such as energy, utilities, transportation, and public safety.
5G wireless technology is anticipated to produce very large economic and social benefits in the United States. The Accenture report projects that 5G will create $275 billion in investment, 3 million jobs, and $500 billion in gross domestic product. In addition, the capabilities enabled by 5G technology will allow cities to save millions of dollars. For example, smart lighting automatically will dim public street lights when no pedestrians or vehicles are present. Public transportation will be able to reduce wait times by optimizing bus and train schedules with commuter smartphones. Vehicle-to-vehicle communications will minimize congestion and lead cars through hazardous road conditions.
When it comes to public safety, deployment of 5G networks in smart cities will save lives. High-speed video surveillance will allow first responders to assess crime scenes and dangerous situations before arriving. Real-time monitoring of gunshots will provide the police with exact locations and timelines. Sensors with 5G technology will warn local residents about possible emergencies, such as tornadoes, flooding, or security threats.
Importantly, 5G networks will impact positively cities of all sizes. The report estimates that 5G’s impact on the city of Saratog, CA, with a population of 29,900, will be 300 additional jobs and $50 million in additional economic activity. The use of 5G in the city of Beaumont, TX, with a population of 118,000, will create 1,000 new jobs and $180 million in additional economic activity. The use of 5G in the metropolitan area of Chicago, IL, with a population of 9,472,000, will create 90,000 new jobs and $14 billion in additional economic activity.
Another report published earlier this month by Deloitte, entitled “Wireless Connectivity Fuels Industry Growth and Innovation in Energy, Health, Public Safety, and Transportation,” contains similar findings on the economic and social benefits of 5G wireless technology. This report says that smart cities collectively could create $1.8 trillion in additional revenue to the U.S. economy. With regard to public safety, the Deloitte report finds that a one-minute reduction in response time translates to an 8% reduction in mortality. It also says that self-driving cars could reduce emissions by 40-90%, travel times by 40%, and delays by 20%. Whether the economic impact of 5G technology is $500 billion or $1.8 trillion, it is clear that deployment of 5G will make cities safer, healthier, and contribute significantly to the U.S. economy.
However, there are some existing regulatory barriers and practices that stand in the way of realizing these significant benefits. Some municipalities take 18 to 24 months to approve small-cell implementations. Also, because providers must deploy many densely-placed small cells for networks to operate smoothly, the practice of municipalities charging a fee for each individual cell placement will discourage deployment. Reducing these barriers, by allowing the use of public rights of way, eliminating or minimizing fees, and streamlining approval processes, will increase the rate of 5G deployment and help unlock smart cities.
5G technology is the future of mobile wireless broadband. And the future is now. Without unnecessary delay, the FCC, along with state and local governments, should take affirmative actions that encourage 5G deployment and, at the same time, eliminate, or at least reduce, restrictions and fees that hinder 5G deployment.